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Unreasonable Development Restrictions in Eminent Domain

Inverse Condemnation: Unreasonable Development Restrictions

Unreasonable development restrictions are akin to regulatory takings and arise when a government authority imposes restrictions on a property owner who is attempting to develop their property. This occurs when the governing authority restricts development of property to its highest and best use, or development of any kind is entirely restricted because of regulations imposed on a property owner when they attempt to obtain building permits or zoning changes.

The situations noted above will result in a loss of value to property because it can no longer be developed to its highest and best use. Under eminent domain law, a property owner who is faced with unreasonable development restrictions can pursue a court order to reverse this decision and also file an inverse condemnation claim.

If a property owner is running into road blocks while moving forward with the development of their property, the courts will not allow them to move forward with their claim until they have first exhausted all the available administrative remedies. What does that mean? Let’s pretend that you wish to develop your vacant property with a 5-story condominium complex. In order to do this, you need to file the application for the permit and then you must go before the planning commission, the zoning commission, the board of adjustment, and possibly the city council or the town board. This is called the administrative review process. The courts will not listen to your claim until you have first taken these steps and been denied.

How far through the administrative process you need to go prior to presenting your claim is highly inconsistent in eminent domain law. For example, some cases required the property owner to complete the administrative process two or three times. In other cases, the property owner didn’t even need to go through the process in its entirety. Determination in these cases is almost always done on a case-by-case basis. However, the farther you go through the administrative process, the more likely the courts will agree that you have exhausted your options.

This process is accompanied by what is called a doctrine of futility. This means you can establish that the actions you have completed to date show that even if you did continue down the administrative review process, the end result will be the same, meaning no matter what you do, the government authority will continually deny your development. If this can be established, the courts will accept that any efforts to continue down the road of the administrative review will be futile. They will then allow you to bring your case for review at that point and time.

Claims through the administrative process for inverse condemnation have two components. First, the property owner will go through the administrative process and then seek a court order claiming that the local authority is not granting them the permits to which they think they are entitled. Owners must assert that the local authority’s reason for denying them is arbitrary, capricious or not reasonable. They must also plead inverse condemnation, so that if the regulation is somehow upheld and they are denied the right to develop their property, then an inverse condemnation claim is in place to alternatively ask for the remedy of just compensation.

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